Don't Buy These 5 Stocks Just Because Warren Buffett Did

I often think of the old Middle Eastern saying, "If you truly seek wisdom, you will visit all the tents in the marketplace," when I guest lecture at universities or when I used to talk to clients at brokerage houses or visited buy side shops in Boston and Chicago. I have no problem with fundamental analysis -- or with fundamental analysts or quants that torture data, for that matter. But I like to see people -- students, individual investors and professionals -- keep an open mind to the oldest form of security analysis: technical analysis.

Long-term oriented fundamental investors will buy in adversity -- or simply put, they will buy a stock in a downtrend because it is undervalued. They may even add to a long position even if initial purchases are under water. Technical analysts, on the other hand, want to trade and invest with the trend.

That's why, even though I may want to ride the coattails of successful investors such as Warren Buffett, I will wait until a stock has bottomed and is turning up before I jump in.

With that in mind, here are five stocks that Buffett has bought that I am not prepared to buy just yet.

In this first chart for Apple ( AAPL - Get Report) , it is not hard to see the pattern of lower lows and lower highs -- in other words, a downtrend. Along the way lower, there are a number of downside gaps, which indicate increased selling pressure as prices adjust downward as new information is digested with heavier volume.

The on-balance volume, or OBV, line has been trending lower the past 12 months, telling us that the volume of shares traded on days when Apple closed lower has been heavier than when Apple has closed higher. This is a sign that sellers are more aggressive.

Prices are below the downward-sloping 50-day and 200-day moving averages. The 12-day momentum study in the lower panel has yet to show us a bullish divergence between the price action and momentum. Momentum is a leading indicator, so I watch it closely for clues of a possible turn to the upside.

In this three-year weekly chart of Apple, above, we can see that the slope of the 40-week moving average is pointed down and that prices are below it. The OBV line on a weekly timeframe has been edging lower since early 2015! The trend-following moving average convergence/divergence oscillator is in a bearish configuration below the zero line. Key chart support is below the market in the $80-to-$70 area.

Apple is a holding in Jim Cramer's Action Alerts PLUS charitable portfolio. "There are no two ways around it: Apple's descent over the past month has been a tough, frustrating and at times confounding pill to swallow," Cramer and Research Director Jack Mohr wrote recently. "Although the path to value creation will inevitably take time, we continue to view Apple as a stock that should be owned, not traded."

Liberty Global

This daily chart of Liberty Global ( LBTYA) , above, shows a decline for much of the past 12 months. Prices are below the declining 200-day simple moving average line but have crossed above and below the shorter 50-day average. The OBV line has been in a downtrend the past year and is still weak this year even though prices have improved a little from a February low. In the lower panel, we find no bullish divergence to alert us to a turnaround.

In this weekly chart of LBTYA, above, we can see prices below the declining 40-week moving average. The OBV line is pointed down and the MACD oscillator is below zero (meaning a negative trend) and looks like it could be narrowing towards a new sell signal.

Phillips 66

In this daily chart of Phillips 66 ( PSX - Get Report) , above, we can see prices in a short-term downtrend as part of a longer-term neutral or sideways trend. Prices are below the declining 50-day average and below the flat 200-day average. The OBV line has been neutral to bearish since November. In the lower panel is the momentum study, and there is no bullish divergence yet to foreshadow a rally.

In this weekly chart of PSX, above, we can see a high near the end of 2015 and then a lower high early this year. A weekly close below $75 could turn this chart bearish, as it will be a lower low and give us a downtrend. The OBV line on this weekly timeframe is not pointed up, and the MACD oscillator is flashing a sell signal as it declines below the zero line.

Visa

In this daily chart of Visa ( V - Get Report) , above, we can see an upward "cant" to the price action. We could call it an uptrend, but if we focus on the more recent data, we cannot get bullish. Even though prices recently probed the space above $80, they retreated quickly, and the OBV line did not respond much on the upside, suggesting that investors may have done some selling into the price strength. The MACD oscillator is bearish and could soon cross below the zero line.

In this weekly chart of Visa, above, we do see an uptrend, but it is inherently weak, extended and perhaps poised to reverse to the downside. The weakness in this uptrend is the volume or rather the lack of volume. Technicians like to see a trend confirmed by volume, and volume has not expanded on the rally. The OBV line has been flat since November, and the MACD oscillator made a lower high and is poised to cross in a new sell signal. A weekly close below $70 will make the chart look like a double top pattern, in my opinion.

Visa is also a holding in Jim Cramer's Action Alerts PLUS charitable portfolio. "We view shares as undervalued relative to its growth profile and expect upside to be driven by strength in the company's core business, larger-than-expected accretion from its acquisition of Visa Europe and accelerating adoption rates beginning in June, when Costco launches its Citi/Visa co-branded card," Cramer and Research Director Jack Mohr wrote recently.

Bank of New York

This chart of Bank of New York ( BK - Get Report) shows a countertrend rally in a longer-term downtrend. Prices are barely holding on above the declining 200-day average line. The 50-day average is still positive but could be turning flat. The OBV line is pointed down, as is the MACD oscillator. BK is not saying "buy me."

In this weekly chart of BK, above, we can see the 40-week moving average line pointed down. The OBV line has been weakening since early 2015, and there is no bullish divergence on this chart to suggest that momentum is leading with a bullish signal.

Palo Alto Networks' crucial earnings day events on Wednesday could determine share price direction in the immediate term. Ahead of the print, the stock still looks like a solid GARP play to be held over longer periods of time.